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What is trip cancellation insurance?

A large number of people each year make plans to travel. Sometimes plans do not work out, and those people could face the prospect of losing hundreds, if not thousands of dollars because of cancellations. Fortunately, there is a kind of insurance available to travelers to help them in such dire circumstances: trip cancellation insurance. Basic trip cancellation insurance is designed to cover up to 100% of the pre-paid, non-refundable travel costs when the reason for cancellation is covered by the policy.

As with most purchases, the old phrase, caveat emptor, applies here: buyer beware. Know what the policy covers, and what it does not. It is up to purchasers to know what they are buying.

Here are some common situations not covered by basic trip cancellation policies:

  • Cancelling because you cannot afford it
  • Cancelling because of weather changes (not counting hurricanes, or similar)
  • Cancelling because you changed your mind
  • Cancelling for one of a number of health issues
  • Cancelling for one of a number of family issues

The length of the list of situations not covered by can a bit daunting, but you need to understand the policy you are purchasing. It may be costly to assume your reason for cancelling is valid, when it is excluded by the policy.

Some of these policy exclusions may be waived when you purchase different waivers to the basic plan. These are some of the waivers that may be added to a basic policy:

  • Cancellation due to pre-existing medical conditions
  • Cancellation due to the airline/travel company going out of business
  • Cancellation because of employment requirements

There is another way around the limitations of the basic policy: a cancellation for any reason option. This option pretty well explains itself. The purchase of this option will allow you to recover the pre-paid, non-refundable costs of your trip cancelled for any reason. There are some rules applicable to purchasing this option:

  • You may have to insure 100% of your trip
  • You may have to cancel more than 48 hrs before the departure date
  • You will likely have to purchase it between 10 and 30 days before your departure

Trip cancellation is insurance which may be purchased on its own, but it is commonly included as part of a trip insurance package, which can include flight, accommodation, and health insurance.

The cost of insurance generally ranges from 4% to 12% of the total pre-paid, non-refundable trip cost. So, if your payment was $5000, you likely will pay between $200 and $600 for coverage.

There may be other avenues available to help you if you need to cancel all or part of your trip:

  • Your credit card may offer some level of protection if the trip is paid for using that card
  • Having accommodations with flexible cancellation policies
  • Airlines often have rescheduling policies that may be helpful
  • The travellers’ list of rights is a concept that is gaining popularity world-wide, so it may be helpful to you.

Again, one of the best things you can do for yourself is understand what the coverage of any policy contains, and what it does not.